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How VMWare’s $1.3 Billion Nicira Acquisition Is Helping It

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$1 billion from NSX

VMware (VMW) parted with $1.3 billion three years ago to acquire Nicira, a software-defined networking company. Now, VMware is beginning to show that it made the right decision.

The company recently said that it was eyeing $1 billion in the current year from the sale of a product made possible by its Nicira acquisition. The product is called NSX, and it’s aimed at companies that want to save money and effort in adjusting their network infrastructures to align with their needs.

The market for network virtualization systems, including software and hardware, is expected to be worth $15.5 billion by 2020, up sharply from $2.7 billion in 2015, according to IHS Markit.

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Saving on network infrastructure adjustment costs

A company that uses NSX won’t have to replace its routing and switching hardware as its needs change. Instead, it can easily reconfigure the hardware via a software interface to align it with the organization’s networking needs.

In an economy where corporations are trying to operate as efficiently as possible, companies are warming to NSX because of its cost benefits. VMware said that it signed the largest ever NSX deal in the last quarter—one worth $10 million.

Modern IT spending

With NSX, VMware is hoping to boost its share of enterprise spending on modern IT (information technology) products. VMware itself is in the server virtualization space, and pairing it with network virtualization strengthens its play in the modern IT market so that it can beat competition from rivals such as Cisco (CSCO), IBM (IBM), Citrix (CTXS), and Hewlett-Packard Enterprise (HPE).

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